Showing papers in "American Economic Journal: Applied Economics in 2011"

Are High-Quality Schools Enough to Increase Achievement Among the Poor? Evidence from the Harlem Children's Zone †

Abstract: Harlem Children's Zone (HCZ), an ambitious social experiment, combines community programs with charter schools. We provide the first empirical test of the causal impact of HCZ charters on educa- tional outcomes. Both lottery and instrumental variable identifica- tion strategies suggest that the effects of attending an HCZ middle school are enough to close the black-white achievement gap in math- ematics. The effects in elementary school are large enough to close the racial achievement gap in both mathematics and ELA. We con- clude with evidence that suggests high-quality schools are enough to significantly increase academic achievement among the poor. Community programs appear neither necessary nor sufficient. (JEL H75, I21, I28, J13, R23)

Climate Change, Mortality, and Adaptation: Evidence from Annual Fluctuations in Weather in the US

Abstract: The climate is a key ingredient in the earth’s complex system that sustains human life and well-being. There is a growing consensus that emissions of greenhouse gases due to human activity will alter the earth’s climate, most notably by causing temperatures, precipitation levels, and weather variability to increase (Intergovernmental Panel on Climate Change (IPCC) 2007). The development of rational policies requires estimates of the costs associated with these changes in our planet. Integrated Assessment Models (IAMs) are a popular method to model the costs of climate change. IAMs combine general circulation models of climate and computable general equilibrium economic models to determine the interrelationship between climate and economic activity and policies that affect both of them. An appealing feature of these models is that they allow for a wide range of adaptations

Health Capital and the Prenatal Environment: The Effect of Ramadan Observance during Pregnancy

Abstract: This paper uses the Islamic holy month of Ramadan as a natural experiment in diurnal fasting and fetal health. Among births to Arab parents in Michigan, we find prenatal exposure to Ramadan results in lower birth weight. Exposure in the first month of gestation also reduces the number of male births. Turning to long-term "fetal origins" effects, we find Muslims in Uganda and Iraq are 20 percent more likely to be disabled as adults if early pregnancy overlapped with Ramadan. Estimated effects are larger for mental (or learning) disabilities. Our results suggest that relatively mild prenatal exposures can have persistent effects. (JEL I12, J16, O15, O17, Z12 )

The Labor Market Returns to Cognitive and Noncognitive Ability: Evidence from the Swedish Enlistment

Abstract: sonal interview conducted by a psychologist. We find strong evidence that men who fare poorly in the labor market—in the sense of unemployment or low annual earnings—lack noncognitive rather than cognitive ability. However, cognitive ability is a stronger predictor of wages for skilled workers and of earnings above the median. (JEL J24, J31, J45)

Traffic Congestion and Infant Health: Evidence from E-ZPass

Abstract: Evidence of the significant negative health externalities of traffic congestion are provided in this paper. The authors studied the effect of E-ZPass, and thus sharp reductions in local traffic congestion and emissions, on the health of infants. Specifically, infants born to mothers living near toll plazas were compared to infants born to mothers living near busy roadways but away from toll plazas. Differences in the health of infants born to the same mother, but who differ in terms of whether or not they were “exposed” to E-ZPass were also examined. It was found that reductions in traffic congestion generated by E-ZPass reduced the incidence of prematurity and low birth weight among mothers within 2km of a toll plaza by 10.8% and 11.8% respectively. Estimates from mother fixed effects models were very similar. The results suggest that traffic congestion is a significant contributor to poor health in affected infants. Estimates of the costs of traffic congestion should account for these important health externalities.

Mechanisms and Impacts of Gender Peer Effects at School

Abstract: The consequences of gender social and learning interactions in the classroom are of interest to parents, policy makers, and researchers. However, little is known about gender peer effects in schools and their operational channels. In this paper, we estimate the effects of classroom gender composition on scholastic achievements of boys and girls in Israeli primary, middle, and high schools and identify the mechanisms through which these peer effects are enacted. In particular, we examine whether gender peer effects work through changes in classroom learning and social environment, teaching methods and pedagogy, and teacher burnout and work satisfaction. In assessing these mechanisms, we distinguish between the effects generated by changes in the classroom gender composition and those generated by changes in the behavior of students. To control for potentially confounding unobserved characteristics of schools and students that might be correlated with peer gender composition, we rely on idiosyncratic variations in gender composition across adjacent cohorts within the same schools. Our results suggest that an increase in the proportion of girls leads to a significant improvement in students' cognitive outcomes. The estimated effects are of similar magnitude for boys and girls. As important mechanisms, we find that a higher proportion of female peers lowers the level of classroom disruption and violence, improves inter-student and student-teacher relationships as well as students' overall satisfaction in school, and lessens teachers' fatigue. We find, however, no effect on individual behavior of boys or girls, which suggests that the positive peer effects of girls on classroom environment are due mostly to compositional change, namely due to having more girls in the classroom and not due to improved behavior of peers.

Low-Skilled Immigration and the Labor Supply of Highly Skilled Women

Abstract: Low-skilled immigrants represent a signi…cant fraction of the labor employed in service sectors that are close substitutes of household production like housekeeping and babysitting services. This paper studies whether the increased supply of low-skilled immigrants has led high-skilled women, who have the highest opportunity cost of their time, to change their time use decisions. Exploiting cross-city variation in immigrant concentration, we …nd that low-skilled immigration has increased hours worked by women with a professional degree or a Ph.D. The estimated magnitudes suggest that the low-skilled immigration ‡ow of the period 1980-2000 increased by approximately 45 minutes a week the average time of market work of women belonging to this group. We also …nd that the fraction of highly educated women working more than 50 (and 60) hours a week increases with low-skilled immigration. Consistently, we …nd a decrease in the time women in this education group spend in household work and an increase in their reported expenditures on housekeeping services. Except for smaller but �

Do Teenagers Respond to HIV Risk Information? Evidence from a Field Experiment in Kenya

Abstract: This brief summarizes the teenagers respond to HIV risk information? Evidence from a field experiment in Kenya. The training occurred over four months from February 2003 to May 2003. The relative risk campaign was phased in from July 2004 to October 2004. Providing information on the relative risk of HIV infection by partner's age led to a 28 percent decrease in teen pregnancy, an objective proxy for the incidence of unprotected sex. Self-reported sexual behavior data suggests substitution away from older (riskier) partners and toward same-age partners. In contrast, the official abstinence-only HIV curriculum had no impact on teen pregnancy. These results suggest that teenagers are responsive to risk information, but their sexual behavior is more elastic on the intensive than on the extensive margin.

Subsidizing Vocational Training for Disadvantaged Youth in Colombia: Evidence from a Randomized Trial

Abstract: This paper evaluates the impact of a randomized training program for disadvantaged youth introduced in Colombia in 2005. This randomized trial offers a unique opportunity to examine the impact of training in a middle income country. We use originally collected data on individuals randomly offered and not offered training. The program raises earnings and employment for women. Women offered training earn 19.6 percent more and have a 0.068 higher probability of paid employment than those not offered training, mainly in formal-sector jobs. Cost-benefit analysis of these results suggests that the program generates much larger net gains than those found in developed countries. (JEL I28, J13, J24, O15)

Was There Really a Hawthorne Effect at the Hawthorne Plant? An Analysis of the Original Illumination Experiments †

Abstract: The "Hawthorne effect" draws its name from a landmark set of studies conducted at the Hawthorne plant in the 1920s. The data from the first and most influential of these studies, the "Illumination Experiment/' were never formally analyzed and were thought to have been destroyed. Our research has uncovered these data. Existing descriptions of supposedly remarkable data patterns prove to be entirely fictional. We do find more subtle manifestations of possible Hawthorne effects. We also propose a new means of test ing for Hawthorne effects based on excess responsiveness to experi menter-induced variations relative to naturally occurring variation. (JEL C90, J24, J28, M12, M54, N32)

Economic Shocks and Civil Conflict: A Comment

Abstract: Miguel, Satyanath, and Sergenti (2004) argue that lower rainfall levels and negative rainfall shocks increase conflict risk in Sub-Saharan Africa. This conclusion rests on their finding of a negative correlation between conflict in t and rainfall growth between t-1 and t-2. I argue that this finding is driven by a positive correlation between conflict in t and rainfall levels in t-2. If lower rainfall levels or negative rainfall shocks increased conflict, one might have expected MSS’s finding to reflect a negative correlation between conflict in t and rainfall levels in t-1. In the latest data, conflict is unrelated to rainfall.

Menstruation, Sanitary Products, and School Attendance: Evidence from a Randomized Evaluation

Abstract: Policy-makers have cited menstruation and lack of sanitary products as barriers to girls' schooling. We evaluate these claims using a randomized evaluation of sanitary products provision to girls in Nepal. We report two findings. First, menstruation has a very small impact on school attendance. We estimate that girls miss a total of 0.4 days in a 180 day school year. Second, improved sanitary technology has no effect on reducing this (small) gap. Girls who randomly received sanitary products were no less likely to miss school during their period. We can reject (at the 1 percent level) the claim that better menstruation products close the attendance gap. (JEL I21, J13, J16, O12)

Improving the Design of Conditional Transfer Programs: Evidence from a Randomized Education Experiment in Colombia †

Abstract: Using a student level randomization, we compare three education-based conditional cash transfers designs: a standard design, a design where part of the monthly transfers are postponed until children have to re-enroll in school, and a design that lowers the reward for attendance but incentivizes graduation and tertiary enrollment. The two nonstandard designs significantly increase enrollment rates at both the secondary and tertiary levels while delivering the same attendance gains as the standard design. Postponing some of the attendance transfers to the time of re-enrollment appears particularly effective for the most at-risk children. (JEL H23, I21, I22, J13, O15)

The Wrong Side(s) of the Tracks: The Causal Effects of Racial Segregation on Urban Poverty and Inequality

Abstract: A striking negative correlation exists between an area’s residential racial segregation and its population characteristics, but it is recognized that this relationship may not be causal. I present a novel test of causality from segregation to population characteristics by exploiting the arrangements of railroad tracks in the nineteenth century to isolate plausibly exogenous variation in areas’ susceptibility to segregation. I show that this variation satisfies the requirements for a valid instrument. Instrumental variables estimates demonstrate that segregation increases metropolitan rates of black poverty and overall black-white income disparities, while decreasing rates of white poverty and inequality within the white population. (JEL I32, J15, N31, N32, N91, N92, R23) Contents The Wrong Side(s) of the Tracks: The Causal Effects of Racial Segregation on Urban Poverty and Inequality † 34

Minimum wages and firm profitability

Abstract: Although there is a large literature on the economic effects of minimum wages on labour market outcomes (especially employment), there is hardly any evidence on their impact on firm performance. This is surprising: minimum wages appear to have a significant impact on wages, but only a limited impact on jobs, so it is natural to imagine there must be a stronger impact on other aspects of firm behaviour. In this paper we consider the impact of minimum wages on firm profitability by exploiting the introduction of a minimum wage to the UK labour market in 1999. We use pre-policy information on the distribution of wages to construct treatment and comparison groups and implement a difference in differences approach. We show evidence that firm profitability was significantly reduced (and wages significantly raised) by the minimum wage introduction. This emerges from separate analyses of two distinct types of firm level panel data (one on firms in a very low wage sector, UK residential care homes, and a second on firms across all sectors). Interestingly, we find no evidence that the profitability reductions resulted in increases in firm exit, so our findings may be consistent with redistribution of quasi-rents towards low wage employees.

Schooling and the Vietnam-Era GI Bill: Evidence from the Draft Lottery

Abstract: Draft-lottery estimates of the causal effects of Vietnam-era military service using 2000 census data show marked schooling gains for veterans We argue that these gains can be attributed to Vietnam veterans’ use of the GI Bill rather than draft avoidance behavior At the same time, draft lottery estimates of the earnings consequences of Vietnam-era service are close to zero in 2000 The earnings and schooling results can be reconciled by a flattening of the ageearnings profile in middle age and a modest economic return to the schooling subsidized by the GI Bill Other long-run consequences of Vietnam-era service include increases in migration and public sector

Re-examining Economic Shocks and Civil Conflict

Abstract: Miguel, Satyanath, and Ernest Sergenti (2004), henceforth MSS, show that economic growth is negatively related to civil conflict in Africa, using annual rainfall variation as an IV for growth. Antonio Ciccone (2011) argues that thanks to rainfall's mean-reverting nature, rainfall levels are preferable to annual changes. We make three points. First, MSS's findings hold using rainfall levels as instruments. Second, Ciccone (2011) does not provide theoretical justification for preferring rainfall levels. Third, the first-stage relationship between rainfall and growth is weaker after 2000, suggesting that alternative instruments are needed when studying recent conflicts. We highlight the accumulating microeconomic evidence that adverse economic shocks lead to political violence. (JEL D74, E32, O11, O17, O47)

Government Transfers and Political Support

Abstract: We estimate the impact of a large anti-poverty program – the Uruguayan PANES – on political support for the government that implemented it. The program mainly consisted of a monthly cash transfer for a period of roughly two and half years. Using the discontinuity in program assignment based on a pre-treatment score, we find that beneficiary households are 21 to 28 percentage points more likely to favor the current government (relative to the previous government). Impacts on political support are larger among poorer households and for those near the center of the political spectrum, consistent with the probabilistic voting model in political economy. Effects persist after the cash transfer program ends. We estimate that the annual cost of increasing government political support by 1 percentage point is roughly 0.9% of annual government social expenditures.

Marrying Up: The Role of Sex Ratio in Assortative Matching

Abstract: By observing the large negative exogenous shock to the French male population from to WWI casualties, we study the effect of a change in the sex ratio on marital assortative matching by social class. First, we analyzed a novel data set that links marriage-level to French population and military mortality. Then, we calculated the sex ratio in a region with military mortality, which exhibits exogenous geographic variation. Ultimately, we found that men married women of higher social class than themselves more often in regions that experienced a larger decrease in the sex ratio. A decrease in the sex ratio of man to woman from 1.00 to 0.90 increased the probability that men married up by 8 percent. These findings provide insight into individuals' preferences for spouses. Men appear to prefer to marry higher-class spouses, but cannot do so when the sex ratio is balanced.

Improving educational quality through enhancing community participation : results from a randomized field experiment in Indonesia

Abstract: This study evaluates the effect of four randomized interventions aimed at strengthening school committees, and subsequently improving learning outcomes, in public primary schools in Indonesia. All study schools were randomly allocated to either a control group receiving no intervention, or to treatment groups receiving a grant plus one or a combination of three interventions: training for school committee members, a democratic election of school committee members, or facilitated collaboration between the school committee and the village council, also called linkage. Nearly two years after implementation, the study finds that measures to reinforce existing school committee structures, the grant and training interventions, demonstrate limited or no effects; while measures that foster outside ties between the school committee and other parties, linkage and election, lead to greater engagement by education stakeholders and in turn to learning. Test scores improve in Indonesian by 0.17 standard deviations for linkage and 0.22 standard deviations for linkage+election. The election intervention alone leads to changes in time household members accompany children studying per week, but this does not lead to learning. Linkage is the most cost effective intervention, causing a 0.13 change in standard deviation in Indonesian test scores for each 100 dollars (US) spent.

Conscription and Crime: Evidence from the Argentine Draft Lottery

Abstract: We estimate the causal effect of mandatory participation in military service on individuals' subsequent involvement in criminal activities. To identify this causal effect, we exploit the random assignment of young men to conscription in Argentina through a draft lottery. Using a dataset that includes draft eligibility, participation in military ser- vice, and criminal records, we find that conscription increases the likelihood of developing a criminal record. The effects are significant not only for cohorts that provided military service during wartime, but also for those that served during peacetime. Our results do not support the introduction of conscription for anti-crime purposes. JEL (H56, K42, O17)

Caste as an Impediment to Trade

Abstract: We compare outcomes across two types of villages in rural India. Villages vary by which caste is dominant (owns the majority of land): either a low or high caste. The key finding is that income is substan tially higher for low-caste households residing in villages dominated by a low caste. This seems to be due to a trade breakdown in irriga tion water across caste groups. All else equal, lower caste water buy ers have agricultural yields which are 45 percent higher if they reside in a village where water sellers are of the same caste compared to

School Inputs, Household Substitution, and Test Scores †

Abstract: Empirical studies of the relationship between school inputs and test scores typically do not account for household responses to changes in school inputs. Evidence from India and Zambia shows that student test scores are higher when schools receive unanticipated grants, but there is no impact of grants that are anticipated. The authors show that the most likely mechanism for this result is that households offset their own spending in response to anticipated grants. Our results confirm the importance of optimal household responses and suggest caution when interpreting estimates of school inputs on learning outcomes as parameters of an education production function.

Purchasing Power Parity Exchange Rates for the Global Poor

Abstract: The first of the Millennium Development Goals targets global poverty. The global poverty number is estimated by the World Bank as a worldwide count of people who live below a common international poverty line. This line, loosely referred to as the dollar-a-day line, is calculated as an average over the world’s poorest countries of their national poverty lines expressed in international dollars. The average is then converted back to local currency to calculate each country’s counts of those living below the line. The counts come from household surveys, the number and coverage of which have steadily increased over the years. The conversion of national poverty lines to international currency and the conversion of the global line back to local currency are both done using purchasing power parity (PPP) exchange rates from the various rounds of the International Comparison Program (ICP). These PPPs, unlike market exchange rates, are constructed as multilateral price indexes using directly observed consumer prices in many countries. This paper is about the construction of the PPPs and their effect on the poverty estimates. In the first dollar-a-day poverty calculations, the World Bank (1990) used price indexes for GDP, but this practice was later improved by the use of price indexes for household consumption. Yet even this may be misleading if the price indexes for national aggregate consumption are different from those relevant for people who live at or around the global poverty line. Price indexes are weighted averages

Returns to Local-Area Healthcare Spending: Evidence from Health Shocks to Patients Far From Home

Abstract: Healthcare spending varies widely across markets, and previous empirical studies find little evidence that higher spending translates into better health outcomes. The main innovation in this paper exploits this cross-sectional variation in hospital spending in a new way by considering patients who are exposed to healthcare systems not designed for them: patients far from home when a health emergency strikes. Visitors to Florida who become ill in high-spending areas have significantly lower mortality rates compared to visitors in lower-spending areas. The results are robust within groups of similar visitors and within groups of destinations that appear to be close demand substitutes-areas that likely attract similar visitors.

Enforcement of labor regulation and informality

Abstract: Enforcement of labor regulations in the formal sector may drive workers to informality because they increase the costs of formal labor. But better compliance with mandated benefits makes it attractive to be a formal employee. The authors show that, in locations with frequent inspections, workers pay for mandated benefits by receiving lower wages. Wage rigidity prevents downward adjustment at the bottom of the wage distribution. As a result, lower paid formal sector jobs become attractive to some informal workers, inducing them to want to move to the formal sector.

Financial Constraints and Inflated Home Prices during the Real Estate Boom

Abstract: During the housing boom, financially constrained home buyers artificially inflated transaction prices in order to draw larger mortgages. Using transaction data from Illinois that includes sellers' offers to inflate prices, I estimate that in 2005-2008, up to 16 percent of highly leveraged transactions had inflated prices of up to 9 percent. Inflated transactions were common in low-income neighborhoods and when intermediaries had a greater stake or an informational advantage. Borrowers who inflated prices were more likely to default, but their mortgage rates were not materially higher. Property prices in areas with a high rate of past price inflation exhibited momentum and high volatility. (JEL D14, E31, R31)

Peers, Neighborhoods and Immigrant Student Achievement - Evidence from a Placement Policy

Abstract: We examine to what extent immigrant school performance is affected by the characteristics of the neighborhoods that they grow up in. We address this issue using a refugee placement policy which provides exogenous variation in the initial place of residence in Sweden. The main result is that school performance is increasing in the number of highly educated adults sharing the subject’s ethnicity. A standard deviation increase in the fraction of high-educated in the assigned neighborhood raises compulsory school GPA by 0.9 percentile ranks. Particularly for disadvantaged groups, there are also long-run effects on educational attainment.

Government Advertising and Media Coverage of Corruption Scandals

Abstract: We construct measures of the extent to which the four main newspapers in Argentina report government corruption on their front page during the period 1998–2007 and correlate them with government advertising. The correlation is negative. The size is considerable—a one standard deviation increase in monthly government advertising is associated with a reduction in the coverage of the government’s cor ruption scandals of 0.23 of a front page per month, or 18 percent of a standard deviation in coverage. The results are robust to the inclusion of newspaper, month, newspaper × president and individualcorruption scandal fixed effects, as well as newspaper × president specific time trends. (JEL D72, K42, L82, M37, O17)

Do Social Connections Reduce Moral Hazard? Evidence from the New York City Taxi Industry

Abstract: This study investigates the role of social networks in aligning the incentives of agents in settings with incomplete contracts. Specifically, the study examines the New York City taxi industry where taxis are often leased and lessee-drivers have worse driving outcomes than owner-drivers due to moral hazard. Using within-driver variation and instrumental variable strategies to remove selection, we find that drivers leasing from members of their country-of-birth community exhibit significantly reduced effects of moral hazard, representing an improvement of almost one-half of a standard deviation of the outcome measures. Screening is ruled out as an explanation, and other mechanisms are investigated. (JEL D82, D86, L92, Z13)